I have met with the same problem like yours. But what I am using is Word 2007 rather than Word 2003. As long as a Word document containes several cited references, the Word program slows down. Furthermore, the more references a doc document cantains, the slower the Word 2007 becomes. Sometimes the Word will stop responding for 2-3 minutes after a little change has been made to a document. I have switched off instant formatting too.
When I used Word 2003 before, I have not met with this problem.
My notebook PC configuration: ThinkPad T60, Intel Core 2 CPU T7200, 1G memory.